The pricing of government-guaranteed bank bonds

Aviram Levy () and Andrea Zaghini
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Aviram Levy: Bank of Italy

No 753, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We examine the effects of the government guarantee schemes for bank bonds adopted in the aftermath of the Lehman Brothers demise to help banks retain access to wholesale funding. We describe the evolution and the pattern of bond issuance across countries to assess the effect of the schemes. Then we propose an econometric analysis of one striking feature of this new market, namely the significant �tiering� of the spreads paid by banks at issuance, finding that they mainly reflect the characteristics of the guarantor (credit risk, size of rescue measures, timeliness of repayments) and not those of the issuing bank or of the bond itself.

Keywords: banks; corporate bonds; financial crisis; government guarantees (search for similar items in EconPapers)
JEL-codes: G12 G18 G21 G28 G32 (search for similar items in EconPapers)
Date: 2010-03
New Economics Papers: this item is included in nep-ban and nep-fmk
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_753_10

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